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* Dollar index touches its highest in more than a week
* More dollar weakness seen likely
* Focus moves to Fed chief Powell’s congressional testimony
* Yen rises broadly as stock markets falter
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, Feb 22 (Reuters) - The dollar inched up to a 10-day high on Thursday after minutes from the U.S. Federal Reserve’s January meeting showed policymakers confident in rising inflation, while the euro was left unmoved by its own central bank’s policy minutes.
European Central Bank policymakers meeting last month felt it was too early to change their communication stance to signal a normalisation of policy, even if confidence was growing that inflation would finally rise back to target, minutes showed on Thursday.
Policymakers also felt they must keep a close eye on the euro’s exchange rate, and they the bank must avoid abrupt adjustment as it moves towards tightening the ultra-loose monetary policy that has been in place for several years.
The euro hit the day’s high of $1.2308 after the minutes but quickly eased back to trade down 0.1 percent on the day at $1.2266 against a broadly stronger euro.
“I couldn’t see anything that was out of line with what we’d expected (in the ECB minutes),” said RBC Capital Markets currency strategist Adam Cole.
“Given that they’ve been mentioning it in the opening statements of the press conferences, which is a rare phenomenon, it should be no surprise for markets that the ECB is concerned about the exchange rate.”
The dollar index, which measures the greenback against a basket of six major currencies, climbed to as high as 90.235 , the strongest since Feb. 13, and was last up 0.2 percent at 90.134.
What was widely interpreted as a slightly more upbeat tone in the minutes of the Jan. 30-31 meeting, released on Wednesday, cemented expectations that the Fed will hike rates under its new chief Jerome Powell next month, and that rates will be hiked on at least another two occasions in 2018.
The minutes also showed voting members, as well as the wider group of policymakers, had upgraded their forecasts for the economic outlook since December.
That left the greenback up more than 2 percent from the three-year low it plumbed on Friday, and on track for its first weekly gain of 2018.
“The release of the FOMC (Federal Open Market Committee) minutes has given the dollar a small lift, with confidence expressed that activity and inflation was moving on the right path to merit further gradual rate hikes,” said ING’s head of currency strategy in London, Chris Turner.
“(But) the Fed story has not had much bearing on the dollar over recent quarters, where a recovery in investment opportunities overseas and... concerns about Washington’s dollar policy and twin deficits have driven the dollar lower,” he added. “We think there is a lot more dollar weakness to come.” (Reporting by Jemima Kelly; Editing by Toby Chopra)
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